The EU and UK have signed off on extending current battery and electric vehicle (EV) rules of origin under the Trade and Cooperation Agreement (TCA). Under the existing Trade and Cooperation Agreement, a staged approach was introduced for electric vehicles and batteries which required phased increases in these rules of origin requirements - with the first increase due to take effect on 1 January 2024, before a final increase from 1 January 2027. 

According to the UK government's official statement, this phased approach would increase the content requirements for electric vehicles to be eligible for tariff free trade over the next three years. These were initially designed to reflect industry capability at the time and incentivise investment in domestic battery production. 

"We have been listening to concerns of the sector throughout this process, and I know this breakthrough will come as a huge relief to the industry. The UK Government is delivering a pragmatic solution to keep costs down for businesses and for people at home who want to make the switch to electric vehicles," Prime Minister Rishi Sunak said.

This agreement facilitates UK-EU tariff-free trade in electric vehicles and prevents 10% tariffs being levied on this trade from January. Industry expects this will save car manufacturers and consumers up to £4.3 billion in additional costs and provide long term certainty to the sector as we continue to scale up our domestic battery supply chain and work to deliver our net zero commitments.

The industry's reaction

European manufacturers welcome this solution, which will help support the competitiveness of Europe’s burgeoning electric vehicle manufacturing industry.  

“The long-awaited deal to extend rules of origin by three years provides much-needed certainty to Europe’s growing electric vehicle battery supply chain. Instead of penalising green industries, today’s decision is recognition that it takes time to build up emerging value chains,” noted Sigrid de Vries, ACEA Director General. “It is also a strong signal that the EU is willing to uphold the competitiveness of its critical industries – the deal has potentially avoided a hefty €4.3 billion in tariff costs and saved some 480,000 units of electric vehicle (EV) production.”